YRC Worldwide (NASDAQ:YRCW) was a recent recommendation of legendary investor John Neff, who mentioned it in his presentation last month at an investment seminar in Chicago. It's the largest trucking firm in the U.S., yet it trades at a single-digit P/E multiple. What might have led Neff to single out this stock?

For Fools not familiar with the name, YRC was formed through the merger of several smaller trucking firms, including Yellow Corp., Roadway Corp., and USF Corp. It operates primarily in "less-than-truckload," or LTL, freight load services. The company holds approximately 13% of the highly fragmented and slow-growing LTL market. As a result, management has also worked to expand its overall logistics services, diversifying beyond providing global, national, and regional transportation.

YRC still appears to be benefiting from a strong economy, judging from the second-quarter earnings it released last week. Reported earnings grew almost 13%, and sales jumped 23%. Management is projecting full-year earnings of $5.65-$5.85 per share, for a forward P/E of less than 7.

Beware the cycle
Fools beware: Transportation firms' results tend to fluctuate along with the business cycle. Currently, concerns over potentially slowing economic growth are hurting shipping companies, as evidenced by the anemic results released by package-delivery specialist UPS (NYSE:UPS) last week. For firms such as YRC, business undoubtedly slows during economic downturns; its customers sell fewer goods, and thus have less need to ship products or order supplies. In addition, YRC's numerous competitors in trucking and logistics keep its profit margins razor-thin.

However, as Neff points out, a low P/E prices in a fair amount of downside. If the economy heads south in a hurry, a low-P/E stock has little room to freefall. In addition, Neff is very patient, willing to take advantage of short-term biases in the stock market -- referred to as time arbitrage -- and wait for things to improve. Solid companies are always able to ride out economic downturns and shorter-term issues such as rising gas prices. Neff has mastered the art of finding those companies when they're trading at fair prices.

In addition to the economic concerns and its cutthroat industry, YRC is digesting a number of large acquisitions made over the past couple of years. Its free cash flow could ordinarily be approximated by net income levels, but YRC had to issue debt to fund the purchase of several large companies in 2003 and 2005. This is a common occurrence, but Fools should make certain that management works to pay off debt and enhance free cash flow growth going forward.

Driving into the sunset
YRC is trading at the lowest trailing P/E among its trucking peers. ArkansasBest (NASDAQ:ABFS) trades at 10 times earnings, JB Hunt (NASDAQ:JBHT) 16 times, Con-Way (NYSE:CNW) 12 times , and Old Dominion (NASDAQ:ODFL) 18 times. As such, YRC could offer investors considerable upside just by trading up to its peers' levels. One could even argue that it should trade at a premium, since it's one of the largest firms of its kind, though that argument requires a closer look at the company's details.

Any way you cut it, YRC's upside looks greater than its downside. Its operations could tread water for a while, especially if the economy slows, but any recommendation from John Neff is definitely worth considering - especially when it's a market leader trading for less than 10 times earnings.

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Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned. The Fool has an ironclad disclosure policy. Feel free to email him with feedback or to discuss any companies mentioned further.